Foreign investment in FG’s debt instruments hit $16bn –IMF - Rave 91.7 FM
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Foreign investment in FG’s debt instruments hit $16bn –IMF

Foreign investment in FG’s debt instruments hit $16bn –IMF

Nigeria’s return to positive economic growth and stable exchange rate has triggered increased investors’ confidence in the nation’s economy prompting foreign investment in federal government debt instruments to rise by 300 percent to   $16 billion as at March this year. The IMF Mission Chief to Nigeria, Mr. Amine Mati,   disclosed this yesterday in Lagos  at the Moody’s Investors Service 4th Annual West Africa Summit tagged: “Nigeria’s Recovery: Slow and Sturdy”. He said: “Last year, foreign holdings of local debt was about $4 billion, as of the end of March, foreign holdings of local debt was $16 billion,   a lot of interest. Some in the equities market, there was increase in the equities market in the first nine months of 2017.” Attributing the sharp increase to soaring investors’ confidence in Nigeria, Mati said: “The good news is that Nigeria is coming out of the recession. In 2016, there was a recession which protracted.  Another good news is the stability in the exchange rate. February 2017 was the peak when we had the exchange rate at N520 to a dollar, the official rate at N305 to a dollar and we had different windows. We have seen some convergence, driven by policies and the I & E window has provided some confidence. “That was in April and we also have the oil price up. But the good news is that we need a stable exchange rate. There is returning investor confidence  in the country. “Last year the country raised $4.8 billion including the Diaspora Bond and the Eurobond issuance. This year, the country has raised $2.5 billion from the Eurobond market. The number of investors that keep coming to my office keeps rising.” Meanwhile, Moody’s yesterday said that Nigerian banks now face lower foreign exchange risks and improved operating conditions buoyed by economic recovery and a more liberal foreign exchange policy. The company stated this while affirming a stable outlook for the nation’s banks in a report titled: “Banking System Outlook – Nigeria; Liquidity Risks have Eased but Earnings Pressure and Loan Quality Risks Remain”. Among other things, Moody’s also projected that the ongoing economic recovery will lead to 10 percent increase in banks’ lending to the economy, stressing that non-performing loans will however rise marginally. It stated: “The outlook for the Nigerian banking system remains stable as banks’ foreign currency liquidity risks moderate due to rising oil prices and a more liberal foreign exchange policy. “Despite the stabilisation in banks’ foreign currency funding and liquidity profiles, Moody’s expects bank earnings to come under pressure. Capital metrics will also decline marginally over the 12 to 18 month outlook period. Additionally, asset quality will remain weak, but a further deterioration in loan performance will be marginal as operating conditions slowly improve.” Quoting its Vice President and Senior Credit Officer, Akin Majekodunmi, the report added: “Operating conditions for the Nigeria’s banks will continue to gradually improve over the next 12 to 18 months, but remain challenging. “Nigeria’s growth prospects remain vulnerable to global oil prices, as crude oil will remain the nation’s largest export commodity and its main generator of foreign currency for the foreseeable future. “Moody’s forecasts a recovery in real GDP growth over the next two years, up from 0.8 percent last year, helping lending growth rise to around 10 percent after a 15.4 percent contraction in 2017.’’ “Nigerian banks’ profitability will nevertheless decline on account of lower yields on government securities, as well as a likely reduction in income from derivatives. However, these pressures will be partially offset by a recovery in loan growth and transaction income from the expansion of digital platforms. “Meanwhile, non-performing loans and associated provisions in the banking system will increase marginally in a delayed response to sluggish economic growth experienced last year, and Moody’s expects them to range between 15.5 percent and 18 percent of gross loans over the outlook period.”


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